EU's 7th Package of Russia sanctions targets gold, Sberbank and fine-tunes existing sanctions

Authored by our Global Sanctions, Export Controls and Customs Teams

On 21 July 2022, the EU expanded its Russia-related asset freeze list, adding 58 individuals and 11 entities, but also extended the available derogations. It now also prohibits imports of Russian gold and gold jewellery, has fine-tuned existing sanctions measures and updated the list of items covered by certain export restrictions.

Asset freeze

Sberbank and numerous individuals and entities added to the asset freeze list

In line with its previous sanctions packages targeting Russia,¹ the EU imposed additional asset freeze restrictions on a number of individuals and entities as from 21 July 2022.² More specifically, the EU designated 58 individuals, including Andrey Anatolyevich Kozitsyn (associated with the Russian Ural Mining and Metallurgical Company - UMMC/UGMK), various family members of Russian businesspersons, government officials and political and media figures, military and law enforcement members, including certain Syrian parties for their support to Russia's actions in Ukraine. The EU also designated 11 entities, including Sberbank (so far only subject to EU capital market sanctions and barred from SWIFT), AVLITA Stevedoring Company and the FORSS Group of Companies.

New and extended derogations

Under the EU asset freeze, all funds and economic resources directly or indirectly owned or controlled by listed parties (including in the aggregate by several listed parties) must be frozen, and (with very limited exceptions) no funds or economic resources can be made available to them, directly or indirectly. The EU has now extended the available derogations, allowing competent Member State authorities to authorise the release and/or making available of funds and economic resources where necessary for:

• As regards Sberbank only, the termination by 22 August 2023 of operations, contracts, or other agreements, including correspondent banking relations concluded with Sberbank before 21 July 2022;³
• Also as regards Sberbank only, the completion, by 31 October 2022, of an ongoing sale or transfer of proprietary rights directly or indirectly owned by Sberbank in an EU entity;⁴
• The sale and transfer or proprietary rights in EU entities that are directly or indirectly owned by an EU asset freeze party, as long as the sale and transfer takes place by 31 December 2022 or 6 months following the date of designation, whichever is latest (thus extending the 9 October 2022 deadline introduced on 8 April 2022);⁵
• The urgent prevention or mitigation of an event likely to have a serious and significant impact on human health and environmental safety, provided the proceeds resulting from such release are frozen;⁶ and
• As regards only the Russian banks subject to the EU asset freeze, the purchase, import or transport of agricultural and food products, including wheat and fertilizers.⁷

It is also worth recalling the new derogation introduced in the 6th package for certain electronic communication services.⁸

Extended reporting obligations: EU Asset Freeze Parties to declare their assets in the EU

New reporting obligations⁹ require all persons subject to EU jurisdiction to immediately report information on accounts and assets within EU jurisdiction belonging to or held/controlled by EU asset freeze parties, whether they have been frozen or not, to the competent national authorities and the European Commission. Further provisions require the sharing of information between competent authorities and the European Commission.

EU asset freeze parties are also required to report, before 1 September 2022 (or 6 weeks from their designation if later) any funds and economic resources belonging to, owned, held or controlled by them, to the competent authority of the EU Member State where the assets are located. Failure to so do will be considered circumvention of EU sanctions, which itself is prohibited under the sanctions.

New ban on import of gold and of gold jewellery

The EU now prohibits the direct or indirect purchase, import or transfer of gold and gold jewellery¹⁰ (and related services) if these items originate in Russia and have been exported from Russia into the EU or (except for the Annex XXVII jewellery) to any third country after 22 July 2022. Products processed in a third country incorporating Annex XXVI gold items are also covered by the prohibition.¹¹ Only limited exceptions apply.

Fine-tuning of key measures: "maintenance and implementation"

More high-tech items subject to export ban and tighter cyber-security derogation

From 22 July 2022, the list of high-tech items (and related software and technology) subject to the prohibition on direct/indirect sale, supply, transfer or export to a party in Russia or for use in Russia (and provision of related services) set out by Article 2a of Council Regulation 833/2014 has been expanded considerably. The items added to Annex VII of the Regulation include certain mining or oil/gas related items, nanomaterials, bearings, ring magnets, valves, vessels, chemical agents, fibrous materials, polymers, machine tools and measuring equipment. No wind-down or grandfathering options are available.¹² In addition, the existing exemption relating to certain cyber-security and information security supply is now subject to prior authorisation,¹³ and more parties have been added to the list for which tighter authorisation requirements apply (including for dual-use items).¹⁴

Amendments to the export ban on certain oil refining goods and technology

The EU has amended the list of items typically used in oil refining and liquefaction of natural gas for which the direct or indirect sale, supply, transfer or export (and related services) are prohibited to a party in Russia or for use in Russia. While certain customs classification codes have been removed (thus seemingly narrowing the scope of the restrictions), the item "Cooling towers and similar plant for direct cooling (without a separating wall) by means of recirculated water, designed to be used with the technology listed in this Annex" has been added.¹⁵ As before, an authorisation is only available for urgent prevention or mitigation of natural or human disasters, and no wind-down is available for the cooling towers.

Ban on access to EU ports extended to sea locks – renewable energy derogation added

The ban on providing Russian vessels access to EU ports will after 29 July 2022 also apply to sea locks in EU territory.¹⁶ In addition, Member State authorities may now also authorise access to EU ports and locks for vessels that have changed their Russian flag or registration to any other State prior to 16 April 2022, provided that the Russian flag or registration was required by a contract and access is necessary for unloading of non-prohibited goods strictly necessary for the completion of renewable energy projects in the EU.¹⁷

Narrower list of industry input items subject to export ban and new derogation

The Annex XXIII list of items which could contribute to the enhancement of Russian industrial capacities and are subject to a ban on direct or indirect sale, supply, transfer or export (and related services) to any party in Russia or for use in Russia has been narrowed down. Notably, tariff code 8208 40 for knives and cutting blades for agriculture/horticulture/forestry machines has been deleted altogether, and certain entries for mechanical appliances have been replaced.

In addition to existing derogations for activities necessary for humanitarian purposes, authorisations can now also be granted in case there is exclusive use and under full control of EU Member States to fulfil maintenance obligations under long-term lease agreements between EU Member States and Russia.¹⁸

New exemptions/derogations to ban on transactions with listed Russian SOEs

Further exemptions are now available with respect to the ban on direct and indirect transactions with certain Russian State-owned Entities ("SOEs"). Transactions are now also allowed if necessary for (i) the direct or indirect purchase, import or transport of pharmaceutical, medical, agricultural and food products, including wheat and fertilisers; and (ii) securing access to judicial, administrative or arbitral proceedings. In addition, it is now also possible to request authorisation for transactions necessary for the import of natural gas, titanium, aluminium, copper, nickel, palladium and iron ore from or through Russia not only into the EU, but also into a country of the European Economic Area, Switzerland or the Western Balkans. Furthermore, the deadline to wind-down joint ventures and similar arrangements with these listed SOEs has been extended from early September to 31 December 2022.¹⁹

Tighter bank deposit limits

The ban on accepting deposits exceeding EUR 100 000 from Russian nationals or nat/insight-alert/eus-sixth-package-russia-sanctions-targets-oil-imports-professional-services-expandsural persons residing in Russia, or legal persons, entities or bodies established in Russia now also covers deposits from entities established in third countries which are majority-owned by Russian nationals or natural persons residing in Russia.²⁰ However, a new derogation now applies for deposits necessary for non-prohibited cross-border trade in goods and services between the EU and Russia.²¹

_{1 See here for previous alerts.
2 Implementing Regulations 2022/1270, 2022/1274 and 2022/1275.
3 Article 6b(2a) of Regulation 269/2014, as inserted by Regulation 2022/1273.
4 Article 6b(2b) of Regulation 269/2014, as inserted by Regulation 2022/1273.
5 Article 6b(3)(a) of Regulation 269/2014, as amended by Regulation 2022/1273.
6 Article 6d of Regulation 269/2014, as inserted by Regulation 2022/1273.
7 Article 6e of Regulation 269/2014, as inserted by Regulation 2022/1273.
8 See previous client alert on the 6th package of 3 June 2022.
9 Articles 8(1) and 9 of Regulation 269/2014, as replaced by Regulation 2022/1273.
10 Annex XXVI covers gold, waste and scrap of gold and gold coins; Annex XXVII covers articles of jewellery and parts thereof of gold or containing gold or metal glad with gold, and articles of goldsmiths' or silversmiths wares' and parts thereof of gold, containing gold or metal glad with gold, as inserted into Regulation 833/2014 by Regulation 2022/1269.
11 Article 3o of Regulation 833/2014 as inserted by Regulation 2022/1269.
12 For the full list with detailed technical specification, see Annex II of Regulation 2022/1269, amending Annex VII of Regulation 833/2014.
13 Articles 2 and 2a, paragraphs (3)-(4) of Regulation 833/2014, as amended by Regulation 2022/1269.
14 Articles 2(7), 2a(7) and 2b(1) and Annex IV of Regulation 833/2014, as amended by Regulation 2022/1269.
15 See Article 3b and Annex X of Regulation 833/2014, as amended by Annex IV of Regulation 2022/1269.
16 Article 3ea of Regulation 833/2014, as amended by Regulation 2022/1269.
17 Article 3ea(5a) of Regulation 833/2014, as amended by Regulation 2022/1269.
18 Article 3k(5) of Regulation 833/2014, as replaced by Regulation 2022/1269.
19 Article 5aa(3aa), (3a) and (3d) of Regulation 833/2014, as amended by Regulation 2022/1269.
20 Article 5b(1) of Regulation 833/2014, as amended by Regulation 2022/1269.
21 Article 5c(1)(f) of Regulation 833/2014, as amended by Regulation 2022/1269.}

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